Loans

9 Months Ended

Sep. 30, 2022

Loans

Loans

NOTE 3 — Loans

The composition of loans by class is summarized as follows:

	At September 30,		At December 31,
	2022		2021
	(In thousands)
Real estate:
Multifamily	$	263,689	$	254,852
Commercial real estate		83,515		48,589
1 – 4 family		31,496		40,753
Construction		—		—
Total real estate		378,700		344,194
Commercial		478,854		432,108
Consumer		18,424		8,681
Total loans held for investment	$	875,978	$	784,983
Deferred loan fees and unearned premiums, net		(864)		(466)
Allowance for loan losses		(10,885)		(9,076)
Loans held for investment, net	$	864,229	$	775,441

At December 31, 2021, the commercial loans balance included Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans of $4.2 million. There were no PPP loans outstanding at September 30, 2022.

The following tables present the activity in the allowance for loan losses by class for the three months ending September 30, 2022 and 2021:

			Commercial
	Multifamily		Real Estate		1‑4 Family		Construction		Commercial		Consumer		Total
	(In thousands)
September 30, 2022
Allowance for loan losses:
Beginning balance	$	1,916	$	902	$	253	$	—	$	7,045	$	155	$	10,271
Provision (credit) for loan losses		11		35		(15)		—		418		201		650
Recoveries		—		—		—		—		—		—		—
Loans charged-off		—		—		—		—		—		(36)		(36)
Total ending allowance balance	$	1,927	$	937	$	238	$	—	$	7,463	$	320	$	10,885
September 30, 2021
Allowance for loan losses:
Beginning balance	$	1,418	$	603	$	312	$	—	$	5,547	$	6,137	$	14,017
Provision (credit) for loan losses		274		(4)		(3)		—		385		3,098		3,750
Recoveries		—		—		—		—		—		—		—
Loans charged-off		—		—		—		—		—		(9,102)		(9,102)
Total ending allowance balance	$	1,692	$	599	$	309	$	—	$	5,932	$	133	$	8,665

The following tables present the activity in the allowance for loan losses by class for the nine months ending September 30, 2022 and 2021:

			Commercial
	Multifamily		Real Estate		1‑4 Family		Construction		Commercial		Consumer		Total
	(In thousands)
September 30, 2022
Allowance for loan losses:
Beginning balance	$	1,789	$	552	$	285	$	—	$	6,319	$	131	$	9,076
Provision (credit) for loan losses		299		385		(47)		—		1,206		297		2,140
Recoveries		17		—		—		—		2		—		19
Loans charged-off		(178)		—		—		—		(64)		(108)		(350)
Total ending allowance balance	$	1,927	$	937	$	238	$	—	$	7,463	$	320	$	10,885
September 30, 2021
Allowance for loan losses:
Beginning balance	$	1,278	$	597	$	342	$	—	$	5,003	$	4,182	$	11,402
Provision (credit) for loan losses		414		2		(33)		—		929		5,088		6,400
Recoveries		—		—		—		—		—		—		—
Loans charged-off		—		—		—		—		—		(9,137)		(9,137)
Total ending allowance balance	$	1,692	$	599	$	309	$	—	$	5,932	$	133	$	8,665

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by class and based on impairment method as of September 30, 2022 and December 31, 2021:

			Commercial
	Multifamily		Real Estate		1‑4 Family		Construction		Commercial		Consumer		Total
	(In thousands)
September 30, 2022
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		1,927		937		238		—		7,463		320		10,885
Total ending allowance balance	$	1,927	$	937	$	238	$	—	$	7,463	$	320	$	10,885
Loans:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	5,819	$	—	$	5,819
Loans collectively evaluated for impairment		263,689		83,515		31,496		—		473,035		18,424		870,159
Total ending loans balance	$	263,689	$	83,515	$	31,496	$	—	$	478,854	$	18,424	$	875,978

			Commercial
	Multifamily		Real Estate		1‑4 Family		Construction		Commercial		Consumer		Total
	(In thousands)
December 31, 2021
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		1,789		552		285		—		6,319		131		9,076
Total ending allowance balance	$	1,789	$	552	$	285	$	—	$	6,319	$	131	$	9,076
Loans:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		254,852		48,589		40,753		—		432,108		8,681		784,983
Total ending loans balance	$	254,852	$	48,589	$	40,753	$	—	$	432,108	$	8,681	$	784,983

Recorded investment is not adjusted for accrued interest, deferred fees and costs, and unearned premiums and discounts.

The following table provides an analysis of the impaired loans by segment as of September 30, 2022 and December 31, 2021. There was no related allowance recorded on any impaired loans as of the periods indicated:

	September 30,				December 31,
	2022				2021
			Unpaid				Unpaid
	Recorded		Principal		Recorded		Principal
	Investment		Balance		Investment		Balance
	(In thousands)
Multifamily	$	—	$	—	$	—	$	—
Commercial real estate		—		—		—		—
1 – 4 family		—		—		—		—
Construction		—		—		—		—
Commercial		5,819		5,819		—		—
Consumer		1		1		—		—
Total	$	5,820	$	5,820	$	—	$	—

The following table provides an analysis of average recorded investment and interest income recognized by segment on impaired loans during the three and nine months ended September 30, 2022.

	For the Three Months Ended September 30,								For the Nine Months Ended September 30,
	2022				2021				2022				2021
	Average		Interest		Average		Interest		Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income		Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized		Investment		Recognized		Investment		Recognized
	(In thousands)
Multifamily	$	—	$	—	$	—	$	—	$	206	$	—	$	144	$	—
Commercial real estate		—		—		—		—		—		—		—		—
1 – 4 family		—		—		—		—		—		—		—		—
Construction		—		—		—		—		—		—		—		—
Commercial		1,455		—		—		—		608		—		—		—
Consumer		—		—		1,703		—		1		—		2,054		—
Total	$	1,455	$	—	$	1,703	$	—	$	815	$	—	$	2,198	$	—

The following tables present the aging of the recorded investment in past due loans by class of loans as of September 30, 2022 and December 31, 2021:

									Total Past
	30-59		60-89		Greater than				Due &
	Days		Days		90 Days		Nonaccrual		Nonaccrual		Loans Not
	Past Due		Past Due		Past Due		Loans		Loans		Past Due		Total
	(In thousands)
September 30, 2022
Multifamily	$	—	$	—	$	—	$	—	$	—	$	263,689		263,689
Commercial real estate		—		—		—		—		—		83,515		83,515
1 – 4 family		—		—		—		—		—		31,496	$	31,496
Construction		—		—		—		—		—		—		—
Commercial		—		—		—		5,819		5,819		473,035		478,854
Consumer		18		9		—		1		28		18,396		18,424
Total	$	18	$	9	$	—	$	5,820	$	5,847	$	870,131	$	875,978

									Total Past
	30-59		60-89		Greater than				Due &
	Days		Days		90 Days		Nonaccrual		Nonaccrual		Loans Not
	Past Due		Past Due		Past Due		Loans		Loans		Past Due		Total
	(In thousands)
December 31, 2021
Multifamily	$	1,034	$	—	$	—	$	—	$	1,034	$	253,818	$	254,852
Commercial real estate		—		—		—		—		—		48,589		48,589
1 – 4 family		—		—		—		—		—		40,753		40,753
Construction		—		—		—		—		—		—		—
Commercial		—		—		—		—		—		432,108		432,108
Consumer		21		10		—		6		37		8,644		8,681
Total	$	1,055	$	10	$	—	$	6	$	1,071	$	783,912	$	784,983

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying

the loans as to credit risk. This analysis is performed whenever a credit is extended, renewed or modified, or when an observable event occurs indicating a potential decline in credit quality, and no less than annually for large balance loans.

The Company uses the following definitions for risk ratings:

Special Mention - Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

	Pass		Special Mention		Substandard		Doubtful
	(In thousands)
September 30, 2022
Multifamily	$	259,595	$	3,373	$	721	$	—
Commercial real estate		79,697		3,818		—		—
1 – 4 family		31,496		—		—		—
Construction		—		—		—		—
Commercial		466,480		6,555		5,819		—
Consumer		16,536		1,888		—		—
Total	$	853,804	$	15,634	$	6,540	$	—

	Pass		Special Mention		Substandard		Doubtful
	(In thousands)
December 31, 2021
Multifamily	$	254,131	$	—	$	721	$	—
Commercial real estate		44,771		3,818		—		—
1 – 4 family		37,738		3,015		—		—
Construction		—		—		—		—
Commercial		410,548		17,977		3,583		—
Consumer		8,681		—		—		—
Total	$	755,869	$	24,810	$	4,304	$	—

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For smaller dollar commercial and consumer loan classes, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity.

The Company has no loans identified as TDRs at September 30, 2022 and December 31, 2021. Furthermore, there were no loans modified during the three and nine months ended September 30, 2022 and 2021 as TDRs. In order to

determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.

Pledged Loans

At September 30, 2022, loans totaling $25.4 million were pledged to the Federal Home Loan Bank of New York for borrowing capacity totaling $20.0 million. At December 31, 2021, loans totaling $33.9 million were pledged to the Federal Home Loan Bank of New York for borrowing capacity totaling $26.0 million.